Colorado

Let's make a deal: How Colorado came to a fracking compromise

Gov. John Hickenlooper listens to U.S. Rep Jared Polis at the state Capitol during a news conference about fracking Aug. 4. (Brennan Linsley, The Associated Press)

On the second day of his vacation, surrounded by science fiction and comic book fans at Comic Con, Alan Salazar looked around the San Diego Convention Center for a quiet place so he could take a phone call from his boss.

It was July 25, and Gov. John Hickenlooper wanted to talk to his trusted staffer about yet another compromise attempt on fracking measures headed to the November ballot. Other deals had fallen apart, but Hickenlooper wanted to try again to get Congressman Jared Polis, the state's $30 billion oil and gas industry, and other parties on board.

"Standing there in the convention center in the company of monsters and superheroes," Salazar said, "I couldn't help but think that John Hickenlooper was taking on his own version of the zombie apocalypse."

Apocalypse indeed.

Colorado has been described as ground zero in the national battle over fracking. The state is so dependent on the energy industry that 30 percent of downtown Denver offices are filled with oil and gas workers, but it's so in tune with the environment that Republicans vote for tax measures to support open space.

A clash was inevitable.

Colorado is also a key battleground when it comes to national politics. Any false move over fracking negotiations, any mistake, could hurt the tough re-election bids of the state's top two Democrats — Hickenlooper and U.S. Sen. Mark Udall.

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Salazar and his 19-year-old son, Josh, cut their vacation short and headed back to Denver, where a deal was announced Aug. 4, although there were times that it nearly collapsed.

Piecing together how the deal went down and the roles of the behind-the-scenes players and those in the limelight is a difficult task. Stories clashed.

The ballot measures would drive "gas patch" voters to the polls, which would help Democrats, some insisted. No, they were igniting conservatives, which would help Republicans in a year that already favored the GOP, others countered.

"The whole thing was an exercise in innuendo and hearsay," said former Republican lawmaker and oil and gas consultant Josh Penry.

But in the process, the governor managed to counter the "lacks leadership" label Republicans have saddled him with ever since the fractious 2013 legislative session, with its battles over guns and renewable-energy mandates. Hickenlooper for weeks led the state through a minefield of negotiations, cajoling oil and gas executives united against Polis' measures but divided on how to proceed, and lining up support elsewhere.

Nearly every person interviewed by The Denver Post doubted that anyone but Hickenlooper, a former geologist who has allies in the energy and environmental communities, could have pulled off a compromise. Even Penry, known to verbally rough up Democratic governors, was impressed.

"I think persistence is definitely a leadership quality," Penry said. "John Hickenlooper was persistent, and that's to his credit."

The fight over fracking

Here are the terms of the compromise:

• Four proposed ballot measures — two supported by the industry, two opposed by the industry and financed by Polis — would be withdrawn.

• The governor would convene an 18-member task force to make recommendations on oil and gas issues to the administration and the 2015 legislature. The panel would consist of six members from the local control and environmental community, six representatives from the oil and gas industry, and six civic leaders.

• The state would agree to drop its lawsuit against Longmont over it instituting its own drilling regulations.

The state later agreed to document compliance with a 2013 rule involving drilling setbacks and mitigation.

The governor's fears about a fracking showdown were validated when he talked with Bryan Lawrence, who founded Yorktown Partners, a company that invests in various types of energy. The firm planned to invest $1 billion in Colorado companies, Lawrence told the governor, but was unlikely to proceed with fracking issues on the ballot.

"I know him socially. We have mutual friends," Hickenlooper said. "I thought, 'If I'm hearing this through just one person, a friend of a friend, the same conversation is probably happening 20 times or 50 times in New York or Houston or other places.'

A member of a fracking crew watches over water tanks at an Anadarko Petroleum Corp. site near Brighton on May 19. (RJ Sangosti, Denver Post file)

"It really highlighted how big the black eye Colorado would get as a place that isn't friendly to business. The risk was huge."

Other states also are engaged in fights over fracking, which has made it possible to extract natural gas in areas once unreachable with conventional technologies.

As fracking moved from Colorado's isolated areas to the populated Front Range, concerns over water and air quality grew. Residents of Longmont, Fort Collins, Boulder, Lafayette and Broomfield passed fracking bans; however, two of those bans were later overturned in court.

Colorado Concern, a consortium of some of the most influential business leaders in the state, discussed the issue at its annual board retreat in January.

"There was mounting concern that there was a lack of understanding about the role energy development plays in our state and in our country," said Tamra Ward, president and CEO of Colorado Concern.

And, she said, members expressed angst about Polis, who could tap his vast wealth to put fracking measures on a statewide ballot.

"Anyone who is so dogmatic about an issue and doesn't appear to be willing to have a broader conversation, that's trouble," Ward said.

But Polis argued he was listening to his constituents and that's what prompted him to
finance ballot measures that would implement greater setbacks of drilling rigs from homes and give local governments more enforcement power — proposals that critics said would cripple the industry.

Democratic insider Ted Trimpa believes Polis has been unfairly maligned over fracking, and he credits the congressman for turning fracking into a statewide conversation with a variety of players.

"Before, it was a just of bunch of far-left activists," Trimpa said.

Ongoing debate

U.S. Rep. Ed Perlmutter organized a dinner at a downtown Denver steakhouse on April 10 to discuss the ongoing fracking debate.

He was in a unique position. As a young lawyer, Perlmutter handled bankruptcies for oil and gas companies when the industry went bust. As a former state senator, he knew how the Capitol operated and had worked on energy issues. As a Democrat, he shared philosophies and confidences with Hickenlooper and Polis.

Among those present: Polis; several oil and gas representatives; Salazar, the governor's chief strategy officer and director of policy, research and legislative affairs; and House Majority Leader Dickey Lee Hullinghorst, a Boulder Democrat heavily involved in crafting industry legislation.

Chris Castilian, director of government affairs for Anadarko Petroleum and deputy chief of staff for former Republican Gov. Bill Owens, believes the dinner was a watershed moment.

"There had been a lot of people involved in this before that time, but none of us were able to begin those conversations in earnest," Castilian said.

Castilian, like so many others, would soon be involved in what was referred to as a full-time part-time job: ballot-measure discussions.

"I was not surprised we didn't get it done," Hullinghorst said. "It was such a complex topic."

Fielding fracking calls

The various players took a week or so off and then got back to work.

White recalled spending Father's Day in Montana with her elderly parents, who were concerned she was spending so much time on the phone talking about fracking.

Some of her calls were with Mike King, the executive director of the Department of Natural Resources, which houses the Colorado Oil and Gas Conservation Commission. The commission regulates the industry.

King and White reported back to their boss that the negotiations were stalled, that it appeared there would be no compromise.

"The governor was like, 'Nope, we can't be done. Come back tomorrow,' " White recalled.

Hickenlooper continued to practice what King called "shuttle diplomacy," going from group to group, executive to executive.

"On any given day, I was probably the biggest pain," King said. "That's just the nature of this. You get frustrated. You bang your head against the wall. Oftentimes, it's two or three people who feel that level of frustration. That's when you get a mushroom cloud."

Various players frequently asked the governor's office whether someone from Washington was trying to get Polis to withdraw his measures.

"My response was 'Can you get somebody from D.C. to call him?' " White said.

Polis said it was erroneously reported that everyone from President Barack Obama to House Minority Leader Nancy Pelosi to Udall to their minions asked him to pull the measures.

"There is no more truth to the bizarre rumors that Obama or other D.C. power brokers expressed an opinion on our Colorado ballot initiatives as there is to rumors that Yoko Ono was behind the proposed ballot initiative," Polis said.

Pelosi's office confirmed Polis' version of events.

Chance for special session

As the summer wore on, the chance for a special session dimmed.

But Rep. Frank McNulty, a Highlands Ranch Republican co-sponsoring an industry-backed ballot measure, said Hickenlooper told him Polis wouldn't listen. When later asked about that, the governor said the congressman was a tough negotiator.

Polis said he supported a draft bill.

Salazar, the governor's staffer, said the bill had support from various but not all factions in the business, energy and environmental communities, but he didn't have a single vote from a Republican lawmaker. Democrats control the legislature, but Hickenlooper said he wouldn't call a special session without bipartisan support.

Some Republicans didn't want to hand Hickenlooper a victory in an election year. Others thought the bill was bad public policy.

Initiative 88 mandated a 2,000-foot setback of drilling rigs from homes. Initiative 89 added an environmental bill of rights to the state constitution and gave local governments the power to enforce it.

The final push

Still, negotiations continued. With an Aug. 4 deadline to turn in signatures for ballot proposals, Hickenlooper talked to Polis and to top local and national oil and gas executives. The governor said the push began July 31.

"Everyone was under extraordinary pressure from their side," Hickenlooper said. "There were people who absolutely wanted to go to the ballot, and they were certain they would win.

"There were long cellphone calls back and forth, back and forth. Every time you would get close, someone would say, 'We just can't go there.' You'd have to go back and give a little, take a little, find some other way to frame it, some other way to get something everybody could live with."

The idea of a task force had been floated early in the legislative session, but it was dismissed. This time, with the promise to drop the state's lawsuit against Longmont, it took hold.

Trimpa, the Democratic insider, believes the earlier, failed efforts made the compromise possible.

"It smoked everyone out. It shook the trees. People had to come up with what their real issues were," he said. "It was all out there."

Hickenlooper also called Reps. McNulty and Jerry Sonnenberg, R-Sterling, to say that he was going to put into place a task force and that Polis was considering pulling down his initiatives. The governor wanted the lawmakers to do the same with their proposal. Their initiative banned distributing vital severance-tax distributions to communities that restricted fracking.

Another proposal from Colorado Concern required petition signature paperwork to include the fiscal impact of a proposal.

"I told him there were a lot of people out there supporting the measure," McNulty said, "and I would have to get back to him."

The night of Aug. 3, the governor's chief of staff began making calls.

"I told people I have called you before saying this was going to go, but it hasn't," White said, "so just consider this my umpteenth heads-up that this may or may not go forward, but right now I would ask you to think about being available tomorrow."

The next day, tensions mounted.

"There were fears of being double-crossed at the end, and that was from both sides," said Salazar.

Anadarko's Castilian worried that the deal would unravel with Polis' additional demands concerning the task force.

"Some of us gently suggested that if he wanted to be involved in state policy, he should run for the state legislature, and he might want to be focusing his efforts on (Veterans Affairs) reform and immigration reform and some of the things back in Washington, D.C.," Castilian said.

But in the end, a compromise was reached.

"There are still a bunch of critics who say we're just kicking the can down the road," Hickenlooper said. "But if those critics had their way, we would be in the middle of a ballot war right now that would scare off investors and put thousands of jobs at risk."

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